Bayer faces 3,500 US lawsuits due to drug recall

Werner Wenning, the chief executive of Bayer, yesterday said the German drugs and chemicals group faces 3,500 lawsuits in the United States after the recall last year of its Baycol cholesterol drug.

Bayer withdrew Baycol, which was sold under the name Lipobay in countries outside the United States, in August 2001 after it was linked with more than 50 deaths worldwide. The number of deaths linked to the drug has since risen to more than 100.

Mr Wenning said the number of suits had risen to 3,500 – the company had already said there were well over 2,000 cases worldwide, most in the United States. "We expect the first case in the first quarter of 2003," he said.

The company has reached settlements in 100 cases and Mr Wenning reiterated that Bayer had made no special provisions for the Baycol litigation as it was insured for such possible cases.

But analysts were still cautious about the impact of the lawsuits. "This will have a negative impact on sentiment, although it does not necessarily mean any payments by Bayer will increase – you need to know, for example, how severely the patients have been damaged," one German analyst said.

The Baycol withdrawal cost Bayer about €800m (£500m) in operating earnings in 2001 and spurred its search for a drugs partner to shore up its product offer. Earlier this month Morgan Stanley gave Bayer a best-case liability bill of €1.58bn, based on the previously reported number of cases of well over 2,000. It assumed Bayer would not have unlimited product liability insurance.

The German analyst kept a maximum financial risk forecast for Bayer concerning Baycol of €1bn, taking into account that the company is insured for an unknown amount.

Analysts have said a good sign for Bayer is that the side effect linked with Baycol – muscle weakness – was acute and did not require long-term monitoring.